Saturn targeted for extinction in GM's plan for survival

February 19, 2009|By Jim Mateja

Roger Smith's dream is officially a nightmare.

The General Motors chairman came up with an idea in the mid-'80s to create a division called Saturn to compete directly with Japanese imports by selling small, low-priced, high-mileage cars. The first Saturn, the SL, bowed with a 1991 model.

Smith spent $3 billion to develop Saturn. And it did create a halo with no-haggle sales and the flower left on the driver's seat after the car was serviced. It did well early on as evidenced by a 17-day supply of cars at some dealerships in an industry where 60 days is considered normal. It beat expectations by posting a profit by 1993.

But Saturn never realized its potential.

There are those who would attribute that to a lack of love -- too few models updated too infrequently.

Saturn also may have suffered from the fact that Smith served as GM chairman when the automaker's market share fell to 30 percent from 40 percent, opening the door wider to Toyota and Honda with their small cars first and leading to their successful luxury divisions.

Smith retired in mid-1990 before the first Saturn came out. No small wonder that GM now plans to sell or fold the division by 2011, ironically after it finally has a strong product mix.

Thank Bob Lutz, who joined GM in 2001, for Saturn's lineup: a high-mileage compact Astra, a nifty Sky roadster, the Outlook crossover with the crucial three rows of seats, the Vue sport-utility vehicle in gas or hybrid flavors, and the Aura sedan, which beat out the Toyota Camry for 2006 North American Car of the Year.

When Lutz announced plans this month to retire at year-end, he said he wanted the division to live long and prosper. But he told Automotive News, a trade publication, that he held out little hope.

"We spent a huge bundle of money in giving Saturn an absolutely no-excuses product lineup top to bottom, [but] the sales just never materialized," he said of a division whose sales slipped nearly 22 percent last year, to about 188,000 units.

Even Lutz professes to be stumped by why Saturn hasn't done well, but he says it's obvious why it no longer has a future with GM.

"We don't have the time or the resources to take 10 years to figure it out and turn it around," he said.

The ailing automaker, which has received $13.4 billion in government loans and is seeking $16.6 billion more, plans to phase out Saturn unless a deal is reached to spin off its distribution network.

With a franchise agreement that sets dealers up as an independent distribution network, it will be easier and cheaper to drop Saturn than the $1 billion it cost GM to kill Oldsmobile in 2004.

There's still talk that the franchise agreement would make the distribution network attractive to a buyer.

"With the rest of the world in a precarious economic state, unless someone from China takes a look, no one is going to be standing in line," said Joe Phillippi, principal of AutoTrends. Jim Hossack, vice president of AutoPacific, is even more realistic.

"Saturn gets its engines, transmission and body stampings from GM, and is so intertwined with GM it couldn't be sold because no one would buy it. Either it gets spun off or it dies of old age like Plymouth did at Chrysler."

Old age at 18? Well, yes, especially when your only cheerleader is retiring.